Force majeure in a geopolitical storm: What businesses should know right now

The escalating tensions in the Middle East, involving the US, Israel, Iran and several Gulf states, are creating real uncertainty for businesses operating in or trading with the region. Shipping routes are disrupted, energy infrastructure is under pressure, and several regional actors have already declared force majeure.

Whenever the geopolitical landscape, global conditions such as pandemics, or sudden government restrictions, shift this rapidly, a familiar question resurfaces: Can a company suspend or delay its contractual obligations due to events beyond its control?

Below is a practical guide to help understand what force majeure means in this context, and what steps should be taken when problems start to occur.

1. FORCE MAJEURE STARTS WITH THE CONTRACT

Force majeure does not apply automatically. Its meaning and impact are typically determined by the specific wording of the contract, as there is no universal legal definition.

Most commercial contracts include a clause covering events such as war, armed conflict, government restrictions, pandemics, or other situations that make contractual performance impossible. Some contracts use narrow itemised lists, others use broader language that captures any event “beyond reasonable control” of the affected party.

The first step is to check the contract and carefully review the wording of the force majeure clause and any related provisions (e.g., hardship or material adverse change clauses). These typically give guidance on what qualifies as a valid reason for non-performance, what relief is possible, and what procedures need to be followed.

2. ASSESS THE REAL IMPACT ON PERFORMANCE

Force majeure generally applies only when performance becomes impossible, not merely when the performance becomes more difficult or excessively expensive. To assess whether the force majeure clause may apply, the following should be considered:

• Has the ongoing situation made the contractual performance factually impossible?
• Is the disruption temporary or long‑term?
• Are there any alternative routes, suppliers, or methods available?

If the contractual performance is still possible, even with delays, increased costs, or operational challenges, then force majeure may not apply. In such cases, hardship provisions (if included in the contract) may offer a more suitable basis for relief.

3. FOLLOW NOTICE REQUIREMENTS CAREFULLY

Most contracts require:

• Prompt written notice to the counterparty, often within a specified timeframe
• A clear explanation of the event and its impact on the contractual performance
• Updates as the situation evolves

Failing to comply with notice requirements set out in the contract can undermine the force majeure claim. Even if the situation is still under assessment, it is usually safer to notify early and refine the details later.

4. TAKE MITIGATION EFFORTS AND ACT IN GOOD-FAITH

Declaring force majeure does not mean that operations can stop entirely without any further action. Most contracts require that the affected party takes certain actions to manage and minimize the impact of the disruption. These obligations typically include:

• Taking reasonable steps to mitigate the impact on contractual performance.
• Exploring alternative suppliers, transportation routes, sources, or methods that could avoid or reduce the disruption.
• Continuing to perform all contractual obligations that are not directly affected by the force majeure event.

Good‑faith conduct is essential. Demonstrating that the business actively sought solutions and communicated transparently helps protect the affected party’s position and reduces the risk of disputes. It is important to document these efforts carefully and in sufficient detail.

5. UNDERSTAND DURATION AND EXIT OPTIONS

Contracts often include rules for prolonged force majeure events. For example, if the disruption lasts beyond 30, 60, or 90 days, one or both parties may have the right to terminate the affected contract.

Key considerations:

• How long must the disruption last before termination is allowed?
• Is termination automatic or optional?
• What happens with prepayments, partial performance, or remaining deliverables?

Having clarity early helps planning for different scenarios, including the best and the worst.

6. THINK BEYOND INTERNAL OPERATIONS

In today’s supply chain-driven business environment, disruptions rarely stop at a single company’s operations. They often begin upstream, with suppliers, subcontractors, logistics partners, carriers, or other third parties whose performance is essential for fulfilling contractual obligations.

When assessing whether force majeure or hardship relief may apply, the contract should be reviewed carefully to understand how third-party failures are treated. Check whether the contract:

• Explicitly covers upstream or subcontractor failures caused by events beyond their control, or
• Holds the contracting party fully responsible for performance, even when suppliers or logistics partners are unable to deliver.

If a supplier or subcontractor issues a force majeure notice, it may be necessary to evaluate whether corresponding notices should be issued further down the chain to protect the affected party’s position. This often requires quick, coordinated communication across the entire supply chain to ensure that each party understands the disruption, its expected impact, and any temporary adjustments to performance.

Staying aligned with upstream and downstream partners helps manage expectations, reduces the risk of cascading breaches, and strengthens the overall ability to navigate the disruption effectively.

7. GOVERNING LAW MATTERS – ESPECIALLY WHEN NO FORCE MAJEURE CLAUSE EXISTS

Without a force majeure clause, the governing law plays a crucial role in determining the available options. Different legal systems take very different approaches to unexpected disruptions. In some jurisdictions, parties may receive relief under statutory doctrines such as impossibility of performance, frustrations of purpose, or exceptional circumstances, while others offer very limited room for non-performance.

It is therefore essential to determine which law governs the contract. Is the agreement subject to the laws of one of the affected jurisdictions, such as the United Arab Emirates, Qatar, Kuwait, Bahrain, the Kingdom of Saudi Arabia, the Sultanate of Oman, Israel, or Iran, and therefore governed by local statutory rules? Or is it subject to English law, commonly used in the region, or perhaps another legal system altogether? The answer will determine what fallback protections may apply in the absence of an express force majeure clause.

The governing law will ultimately shape whether external events, such as geopolitical crises, pandemics, or government-imposed restrictions, can excuse performance, suspend obligations, or allow renegotiation. This is why contracts should clearly specify the governing law and why, in its absence, obtaining legal advice early is essential to understand what fallback protections may (or may not) be available.

8. WHEN IN DOUBT, REVIEW AND SEEK GUIDANCE EARLY

Geopolitical crises create fast‑moving and unpredictable conditions. The biggest risks often arise from acting too late or assuming force majeure will “just apply”. Companies should:

• Revisit force majeure and hardship clauses across key contracts
• Map their exposure in affected regions
• Prepare template notices and communication plans
• Seek legal advice early if performance becomes uncertain

Proper preparation now can reduce financial and operational risk and protect long‑term business relationships.

9. CONCLUDING THOUGHTS

Force majeure is a valuable contractual safety mechanism, but it comes with conditions, procedures, and responsibilities. As the situation in the Middle East continues to evolve, businesses should take proactive steps to understand their contractual obligations, maintain transparent communication, and position themselves to respond swiftly and effectively to any possible disruption.

For further discussion on this topic, commercial contracts, or business across the Middle East, please contact Specialist Counsel Maher Khadour.